Monetary policy ultimately must be conducted in a pragmatic manner that relies not on any particular indicator or model but, instead, reflects an ongoing assessment of a wide range of information in the context of our ever-evolving understanding of the economy.
When the economy was going up, [Milton Friedman and I] both gave the same advice, and when the economy was going down, we gave the same advice. But in between he didn't change his advice at all.
In the late 1960s, the New Classical economists saw the same weaknesses in the microfoundations of macroeconomics that have motivated me. They hated its lack of rigor. And they sacked it.
Peter Montiel has long set the highest standard for lucid textbooks on the macroeconomics of developing countries. Now in this new edition of his superb classic Macroeconomics in Emerging Markets, he has surpassed even himself. He uniquely fills the gap between rich-country-obsessed macro- and micro-obsessed developing-country analysis. No student of the macroeconomics of development will henceforward be able to do without this book.
I've been able to stretch myself, covering policy, looking at tax reform, looking at the broader economy [being at Fox]. It's no longer [just] about the stock market. I'm having a ball. And, the glamor of TV also makes it fun.
As for another profession ... I suppose I'd manage a global-macro hedge fund. I love that kind of stuff. Weird, I know, but I find it fascinating.
A natural way that an economist approaches a problem is to say, here's where I think the economy is going; this is what we need to deal with the problem.
When most people think of economists, they think of macro-economists. Macro-economists try to describe or - even harder - predict the movements of a hugely dynamic system. They're like a transplant surgeon trying to simultaneously transplant every failing organ in someone's body.
True enough, the Fed needs radical reforms. In particular, it needs to replace its failed forecasting models and be rid of the academics who overwhelm the Fed system.
We're not very good at forecasting, and we don't know how to measure the impact of economic policy.
Predicting recessions is indeed a dark art, but I think we are several years away from the next one.
